Outside IR35 SIPP Calculator

Yes, provided the payment meets HMRC's "wholly and exclusively for the purposes of the trade" test. For a limited company director working outside IR35, a pension contribution to the director's SIPP is generally an allowable business expense, as confirmed in HMRC's Business Income Manual (BIM46035). The contribution reduces the company's taxable profit before Corporation Tax is calculated.

The contribution must be commercially justified, meaning it should be proportionate to the director's role and not excessive relative to market rates. HMRC can challenge contributions they consider uncommercially large. In practice, contributions in the range of what you'd expect to pay a director for their services are well within accepted limits. Consult your contractor accountant if you are making very large contributions in a single year.

The annual pension allowance is £60,000 for the 2026/27 tax year. This covers total pension contributions from all sources: your company's employer contributions, any personal contributions you make, and contributions from other sources. The £60,000 is your total, not per-source.

If you have unused allowance from the previous three tax years, you can carry it forward. For example, if you contributed nothing to a pension for three years, you could potentially have up to £240,000 of available allowance (£60,000 current year + three prior years at £60,000 each, assuming the same annual allowance applied). Carry forward rules require you to have been a member of a registered pension scheme in the years you are carrying forward from.

High earners with adjusted income above £260,000 face a tapered annual allowance that reduces their limit by £1 for every £2 of income above the threshold, down to a minimum of £10,000.

Salary sacrifice is a mechanism where an employee agrees to reduce their gross salary in exchange for an employer pension contribution. It works well for employees because it reduces the salary subject to PAYE income tax and National Insurance for both the employer and employee.

For outside IR35 contractors, salary sacrifice is largely irrelevant. You are not operating under PAYE from your limited company; you draw a small optimal salary (typically £12,570, the personal allowance) to avoid income tax and NI, then take the remainder as dividends. Standard SIPP calculators that model salary sacrifice are calculating the wrong thing for your situation.

The correct mechanism for an outside IR35 contractor is a direct employer contribution: your limited company transfers money directly to your SIPP as a pension contribution, before Corporation Tax is calculated. No NI applies. No income tax applies. The full amount lands in the pension. This is fundamentally different from salary sacrifice and much more efficient.

Yes to Corporation Tax, and yes to both Employer and Employee National Insurance.

On Corporation Tax: the contribution is a business expense deducted before profit is calculated, so the company pays no Corporation Tax on that amount. At the small profits rate of 19%, a £20,000 contribution saves £3,800 in Corporation Tax. At the main rate of 25%, the saving is £5,000.

On National Insurance: because the money goes directly to the pension rather than through salary, no Employer NI (15% above the £5,000 secondary threshold) applies, and no Employee NI applies either. This is a significant additional saving on top of the Corporation Tax relief. Distributing the same money as additional salary would attract both layers of NI.

Yes. If you have been a member of a registered pension scheme (including a SIPP, even with a zero balance) in the previous three tax years and have not used your full annual allowance in those years, you can carry forward the unused allowance.

For example, if you have not contributed to a pension for the last three years and each year's unused allowance was £60,000, you could potentially contribute up to £240,000 in the current tax year (£60,000 current allowance plus three years of carry forward). You must use the current year's allowance first before using carry forward years, and carry forward must be applied in order from the oldest year first.

Many contractors use carry forward strategically at year-end to clear accumulated company profits tax-efficiently in a single large contribution. Speak to your accountant or a pension specialist before doing this.

The tapered annual allowance reduces the pension annual allowance for high earners. It applies when your "adjusted income" (defined as total taxable income plus any employer pension contributions) exceeds £260,000. For every £2 above £260,000, your annual allowance reduces by £1, down to a minimum of £10,000 (reached when adjusted income hits £360,000).

For most outside IR35 contractors at typical day rates, the taper does not apply; you would need very high day rates or significant other income to reach £260,000 of adjusted income. If you are a higher-earning contractor and considering a large contribution, check your adjusted income figure with your accountant before proceeding.

From age 57 (rising from 55 in 2028), you can begin drawing from your SIPP. Up to 25% of the fund can be taken as a tax-free lump sum. The remainder is drawn as pension income, taxed at your marginal income tax rate at the time.

The key benefit over taxable income during your working years is the tax-free growth: all investment returns within the SIPP grow free of income tax, CGT, and dividend tax while the fund is accumulating. This compounding effect over a contractor's working life can be substantial.